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Published December 27, 2013, 01:16 AM

FLARING: Beating the Heat

Multiple solutions expected to reduce Bakken flaring and utilize the region’s natural gas

By: Kris Bevill, Prairie Business Magazine

No one wants to set $1 billion on fire and watch it disappear into the atmosphere in a fantastic display of flames. And yet that is precisely what has been happening in the Bakken region as the rate of natural gas flaring continues to outpace the infrastructure and technology needed to harness its potential as an economic resource.

A study released in July by nonprofit research firm Ceres concluded that flaring at Bakken oil wells in 2012 resulted in the loss of approximately $1 billion in fuel. Further, the study determined the flaring of that gas added 4.5 million metric tons of carbon dioxide to the atmosphere, which is the equivalent of adding 1 million cars to the road.

Monthly statistics released from the North Dakota Department of Mineral Resources have shown the percentage of natural gas flared from Bakken wells hovering at around 30 percent since reaching a historical high of 36 percent in 2011. Efforts have been under way to reduce that percentage, but Ceres researchers cautioned that while the percentage of gas flared may be reduced as new infrastructure comes online and utilitization technologies are introduced, the overall amount of gas flared in the Bakken will continue to increase as the gas-to-oil ratio increases at aging wells.

“Some individual companies have shown leadership in curbing flaring, legislators have introduced incentives to limit flaring and several billion dollars have already been invested in additional gas pipeline and processing infrastructure. In addition, the state has set a goal to limit flaring to no more than 10 percent of produced gas,” Ceres report authors Ryan Salmon and Andrew Logan said in the study. “However, Ceres’ analysis of North Dakota oil and gas production data indicates that absolute volumes of flared gas have more than doubled between May 2011 and May 2013. … even if the state’s goal of 10 percent flaring were achieved, total volumes of flared gas in 2020 would still exceed the amount flared in 2010. These findings underscore the importance of solving the problem of flaring in order to limit both environmental impacts and economic waste.”

Flaring Factors

Currently, North Dakota law allows producers to flare natural gas for the first year of the well’s production in order to give the producer time to collect data and determine the gas-gathering requirements for the well site. After 12 months, the producer must cap the well, connect to a gas gathering system or deploy a gas utilization process in order to avoid financial penalties. Producers may also request an extension to the well’s flaring allowance if they can demonstrate that connecting gathering infrastructure to the well site or deploying an on-site utilization technology such as a bi-fuel electrical generator is uneconomical. Because of the high cost of installing pipelines to the Bakken’s remote well sites, the vast majority of extension requests are granted. In fact, according to the Ceres study, the North Dakota Industrial Commission approved 95 percent of the extensions requested between 2011 and 2013.

In addition to the expense associated with installing gas gathering infrastructure is a short but complex list of other factors contributing to the Bakken’s flaring problem. A North Dakota Petroleum Council task force on flaring cites several key factors that it says are making widespread collection of Bakken gas difficult. Factors hindering widespread utilization include the chemical make-up of the gas, the time required to build out gathering and processing capacity, and the harsh climate and widespread geography of the Bakken region, according to the group. And, ironically, while technology is what has made the Bakken boom possible in the first place, technological advances are also outpacing infrastructure capacity, so even some well sites that are connected to gathering infrastructure are flaring because the infrastructure wasn’t built large enough to handle the well’s actual output. Flaring on tribal lands presents another unique hurdle to overcome, according to the task force.

Ron Ness, president of the NDPC, says the task force was created in September at the direction of the group’s board of directors and urging by Gov. Jack Dalrymple and the Industrial Commission to bring together various parties involved with the production, capture and processing of natural gas. The goal of the task force is to address the situation and improve the Bakken’s overall flaring rate. “Individually, companies feel like they’re doing well at addressing it, but holistically the number is likely too large,” Ness says. By bringing involved parties together on a regular basis to discuss the challenges and potential remedies, the group hopes to more quickly identify solutions to Bakken flaring. The 35-member group met 15 times between September and early December to discuss potential technological solutions, according to Ness. The task force plans to present its recommendations to the Industrial Commission this month. (A value-added study being commissioned by the Empower Commission will also be complete this month and should provide further information related to potential uses for Bakken gas.)

Ness says the natural gas task force represents the first time he’s seen such a concentrated focus by the industry to address a specific issue and is unique in that companies which historically have kept their best practices tightly held for competitive and anti-trust reasons are now coming together with the intent of transparency regarding flaring mitigation tactics.

The industry's new effort at transparency is largely because the Bakken’s natural gas is a one-of-a-kind challenge. “Bakken gas is a unique gas that’s really unlike other gases anywhere in the world, so the types of equipment, the processes you can utilize to remotely capture that gas, the things that work all vary here in the Williston Basin versus what they see across the country and the rest of the world,” he says.

One of the things that make the Bakken’s gas so unique is its liquids content. Liquids such as propane, ethane and butane that can be extracted from the gas have more value than the gas itself, so the Bakken’s liquid-rich gas is a boon in that sense. However, the technologies required to separate the liquids from the gas are quite costly and don’t economically scale down to well-site size. Therein lies just one of the struggles associated with making Bakken gas capture an economical process.

Utilization Efforts

There are “an amazing set of great minds” from around the world working on the entire utilization issue, Ness says, but the stand-outs so far appear to be the North Dakota-developed solutions, which he believes is because they have a better understanding of the region’s weather extremes and other unique considerations.

At the University of North Dakota Energy & Environmental Research Center (EERC) in Grand Forks, N.D., researchers have been exploring Bakken-specific gas utilization technologies for several years already. This summer, the center launched a more concerted effort to address the issue via the Bakken Production Optimization Program. The program is a joint venture between the EERC, the NDIC and several of the Bakken’s major producers. It seeks to evaluate the issue using a systems engineering approach in order to develop solutions that adequately address the overall challenge, according to John Harju, associate director for research. To accomplish this, the center is communicating directly with producers to learn what their needs are and what types of solutions they would like to see developed. Results from the request for information are expected to be rolled out in conjunction with the task force’s report.

Harju says that by “drawing a box around the challenge instead of the technology,” as the EERC seeks to do, the odds of developing economical solutions are improved. “I think this is what has frustrated technology providers over the long haul is that they believe they have some solution and they don’t really evaluate the solution in terms that their customer evaluates it,” he says. “Part of this is technology and the capital side of things, but another part is the business model.”

For example, he says, a technology that utilizes well gas might address the producer’s desire to reduce flaring, but if the technology costs $3 million to install at a well that produces a few thousand dollars worth of gas each day, the producer may never break even on the investment.

Harju firmly believes there is not one solution to the Bakken’s flaring problem, but that several gas utilization solutions will be required to effectively address the challenge, including non-technological solutions such as innovative leasing or service offerings from technology providers that will reduce costs for producers. Harju believes the EERC’s research program will help to shed light on the various types of solutions that can be put to use. “I think we’ll begin to elucidate some of these variables that I don’t think have been thoroughly investigated from a systems engineering perspective,” he says.

On the logistical side of the issue, the task force intends to continue working to address the need for new gas gathering lines and the expansion of existing gathering systems to handle production capacity. To accomplish that goal, the task force must also address landowner fatigue and the increasingly significant issue of right-of-way and easement approval. The task force has also set its sights on coordinating with the various entities involved in approving right-of-way needs on the Fort Berthold reservation, where the rate of flaring is currently double that of elsewhere in the Bakken.

Long-Term Potential

Long-term utilization plans primarily center on the widespread installation of gathering and processing infrastructure, but it will be some time before that infrastructure is in place. Oklahoma-based ONEOK Partners has invested billions toward this effort, most recently announcing plans to build its sixth and largest Bakken natural gas processing plant in McKenzie County, increasing the company’s natural gas processing capacity to about 800 million cubic feet per day. But it will be more than a year before that plant, along with other infrastructure expansions planned for the region, will be complete. Other large projects such as the proposed fertilizer plants near Jamestown and Grand Forks, N.D., offer additional significant long-term uses for the fuel, which Ness says encourages natural gas producers to continue building infrastructure and processing plants.

Harju and Ness both expect significant headway to be made toward utilizing Bakken gas this year. Harju predicts a combination of various well-site and multiwell pad technologies will begin to reduce flaring and will be aided by the creation of a regional market for the product. “There won’t be one solution, there will be a tool crib of solutions and there’s going to be a multitude of them,” he says.

Ness also says that the more the state and region can utilize Bakken gas, the better the market will be and the greater the chances that flaring will be more quickly reduced. “It’s a remarkable resource and it’s going to have a substantial impact on North Dakota’s energy future,” he says. “Yes, it’s frustrating that it’s flared right now, but at the end of the day when we end up with a couple of billion-dollar fertilizer plants and some of these other projects that we’re beginning to hear about across North Dakota, it’s going to be a huge economic driver in our state.” PB

Kris Bevill

Editor, Prairie Business

701-306-8561, kbevill@prairiebizmag.com

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